The Ministry of Finance announced on 12 March that the zero rate of VAT on certain food products will not be extended. Which means a return to a 5% VAT rate on basic foods.
The Ministry of Finance justifies its decision by the decline in inflation. The reduced VAT rate on basic food products is effective from 1 February 2022. It was introduced with the inflation reading for January 2022 at 9.2%. on an annual basis.
According to preliminary data from the Central Statistical Office, inflation decreased to 3.9% in January 2024 on an annual basis, and it was the lowest rate of increase in consumer prices in this approach since March 2021. The annual rate of increase in food and non-alcoholic beverage prices also dropped significantly – to 4.9%. in January this year (i.e. lowest since September 2021).
The 5 percent VAT rate will cover:
- meat and fish and their preparations,
- milk and dairy products,
- eggs,
- natural honey,
- nuts,
- vegetables and fruit and their products,
- edible animal and vegetable fats,
- cereals and preparations made from cereals, including bread and pastries,
- certain preparations and milk for infant and child nutrition and dietary foods for special medical purposes.
Challenges for taxpayers
The return of the 5% VAT rate on food will certainly not please consumers. Moreover, it also poses a challenge for taxpayers who trade in these products. They have until the end of March to make the appropriate changes to their systems and procedures (e.g. changes to in-store price presentation) to ensure that the correct VAT rates are applied from 1 April 2024.
Additionally, the return to 5% VAT may pose a particular challenge for sellers using cash registers. From a technical point of view, the cash register provides, among others: blocking the sale of a given product when the value of the tax rate has been increased or previously reduced (so-called tax staggering). This means that when the VAT rate returns to 5%, the sale of selected goods may be blocked, as long as it includes goods with the same name for which the rate was changed.
